Hut Group crisis deepens on ‘loss of confidence’ as stock market decline continues
Hut Group founder Matt Molding has seen the value of his 14.2 per cent stake fall by £701m over the past five weeks
The City fell on The Hut Group and its founder yesterday as the company tried to defend itself amid a stock market decline. A disastrous presentation led to investors fleeing, wiping out £1.8bn of the company’s value in just two hours on Tuesday.
Yesterday, the company, known as THG, found itself in crisis mode as analysts searched the company’s “unproven” investment case and “loss of confidence.” Shares fell 2.9 percent, or 8.4p, to 276.6p, well below the 500p shares floated in September 2020.
Matt Moulding, the company’s founder and executive chairman, saw his 14.2 percent stake fall by £701 million in five weeks. Yesterday, financial advisor Numis lowered its share price target to 230p, suggesting the stock will fall further. The collapse helped short-seller PSquared, which took a 1.01 percent bet against the shares last week, to a profit of around £45 million.
In a rearguard action, THG posted a statement saying that there was “no apparent reason for the stock’s material price movement and no material new information.”
The Manchester-based group, which sells clothing, make-up and protein shakes online, highlighted its ‘strong’ recent trade and a cash balance of £700 million.
In an effort to stem the fall in share prices, non-executive director Damian Sanders bought £49,700 worth of shares at 297.6 pence per share. The move came as some City analysts suggested and was now a good buying opportunity for investors.
The share price came under pressure after THG made a surprise announcement to divest its beauty business and focus on its logistics platform, Ingenuity, an “unproven” loss-making business.
Russ Mold, director at AJ Bell, said, “This creates a conundrum. On the one hand, it makes no sense to go against the grain if the market has decided that THG is a dud.
“On the other hand, investors get the chance to buy stocks at a price where the original source of excitement is essentially thrown in for free.
THG Ingenuity was the reason why the market was initially enthusiastic, a one-stop shop for web sales and logistics, aimed at brands that want to sell directly to consumers.’
A note from The Analyst claimed that THG’s shares were “overhyped” and worth just 260 pence, pressuring Molding to answer questions as a capital markets day event on Tuesday.
But the meeting was a disaster, and investors flocked for the exit, pushing the stock price down 35 percent. The company is in fact undergoing a restructuring one year after the IPO.
Simon Bowler of Numis said: ‘We are concerned that enthusiasm for Ingenuity will wane.’ Roland French of Davy said: ‘Management has lost the confidence of the market.’